The Path to SmartPhone Banking Apps

Despite mobile banking's growth, many financial institutions still view it as a cost rather than a revenue opportunity. In this roundtable we discuss how banks can speed up adoption rates and increase profit margins, and where deployment of apps fits into the strategy.

Why should banks embrace mobile technology?

Steve DuPerrieu, CSI: Mobile solutions can help banks meet three primary needs: recruiting and retaining customers, delivering cross-sell opportunities for customers who do not visit branches and delivering cost savings. Mobile banking meets banks' need to grow and remain relevant with changing customer expectations. Customers still expect the same level of service, but just in new, convenient, around-the-clock ways.

Also, mobile banking solutions complement current bank services. By adding another, easy-to-access channel, banks better meet the needs of changing customer expectations. Banks also increase convenience by allowing customers to bank on their own terms. For banks looking to lower their environmental impact, mobile banking fits in with "green" or lower-cost-to-serve initiatives in place at many financial institutions.

Robb Gaynor, Malauzai Software: Mobile technology adds a new dynamic and interactive channel that lets banks communicate with and influence account holders in an unprecedented way. By building usage patterns and solving early technology problems, mobile banking has provided the infrastructure needed to introduce mobile payments.

What will be the biggest opportunities in mobile over next five years?

Michael Stevenson, Royal Banks of Missouri: Mobile banking is a competitive advantage for financial institutions like us. It's hard to believe, but there are a couple of big banks that don't even have apps, yet practically every successful retail company has one. Great Clips, for example, has an app to schedule hair cut appointments. Apps help us attract younger customers, which is one of our business and marketing goals.

People aren't surfing the Internet anymore; they want a native app -- to tap the icon and go to what they want. It's about convenience, and let's face it -- no one is carrying a laptop anymore. People carry an iPad or a smartphone. With the app, it's all there.

DuPerrieu: Celent research indicates that banks receive a 10-20 percentage point increase in client retention for mobile users. The report also suggests that banks acquire up to 2 percent of new customers due to mobile availability. On the retention side of things, mobile banking provides unique ways to encourage cross-selling for customers who do not visit the branch. Banks can post banner ads or send targeted messages advertising specific products or promotions through mobile apps.

Gaynor: Right now the biggest opportunities in mobile will be realized by financial institutions that get the customer mobile banking experience right. As smart phone adoption increases, mobile marketing will provide unprecedented opportunities for banks to cross-sell and up-sell directly to account holders. Mobile capture will continue to grow, and social media will increase referral opportunities for banks. Banks will leverage consumer usage data from mobile banking to improve and tailor mobile offerings.

Outside of customer experience/retention, what other areas in a bank benefit from mobile channels?

DuPerrieu: Mobile reduces fraud, since users typically monitor their account more frequently. Banks can also set alerts that immediately notify an account holder as transactions occur. Celent research suggests that there is up to a 25 percent reduction in fraud losses for mobile users, depending on the breadth of account alerts.

Stevenson: Apps give us the ability to send alerts to our customer base faster than the web or mail. There are compliance and security gains, as well, and with new regulations, the speed in which we communicate with our customers has become increasingly more important. Examiners are extremely diligent about multi-factor authentication and security. Your mother's maiden name is no longer an acceptable challenge question to confirm identity. Examiners want us educating our staff and clients, and sending out updates on a regular and timely basis.

Marketing was one of the primary reasons we upgraded from SMS text and browser mobile to app-based mobile. The [Malauzai] SmartApp platform gives us the ability to market to our customers in an unprecedented way. It allows us to create market messages that are tailored to any specific segment of our customer base and deliver those messages immediately within the SmartApp.

For example, we may want to target homeowners. If customers within that segment have amassed equity, we might send them a message about home equity rates. On the other hand, customers within a younger segment might be living in an apartment, so we might send marketing messages about the benefits of owning a home or getting prequalified for a home loan. Native apps give us an opportunity to deliver relevant and timely offers, in real time, to very different customer segments.

Gaynor: We believe local marketing is going to be big, because it allows local merchants, banks and consumers to interact within a closed-loop payment eco-system, which makes payments possible now without waiting around for NFC and other infrastructure improvements. A mobile channel can extend the brand of a bank by empowering the bank to deliver a great customer experience through this new and dynamic channel. Further, a customized SmartApp experience can be tailored for each unique customer segment.